Starting plans for most businesses, (let’s call them Plan A) rarely work. Harvard Professor, Amar Bhide, some years back, explained that 93% of successful companies had to pivot (a fancy way to say change, adjust, modify, or start from scratch) and alter their business plans to achieve success. When you start a business, armed with the understanding of how to build a business, you make assumptions, but it is the marketplace that determines what will work and what will not work.
Be flexible and accept that you may have to pivot a few times before the universe smiles upon your venture and your model starts to click.
Now here is the good news: pivoting is often a way to recombine the same resources in a different manner. You may need to develop anew focus, a new customer target, or offer a different bundle of value. Iterate and pivot is the byword. There are very few, if any, truly new ideas. You do not have to be a genius to create a new business model if the current one comes up short.
Getting to Plan B – Breaking Through To A Better Business Model by Mullins and Komisar, is a book I use in my class and I highly recommend it. The authors detail stories of several well-known and less well-known companies as they pivoted multiple times until their model finally worked.
For example, the story of eBay is well known as the founder created a program to sell some of his girlfriend’s junk. Along the way it morphed into the now famous company. Consider Apple – how many times has it pivoted after its near death experience? Today it makes most of its money from phones not computers.
Getting to Plan B offers four key points that will help you improve your business idea as you do your inevitable pivots.
1. Analogs: If you see a company doing something you like, see if that idea can fit into your business. There are good ideas everywhere. Embrace them. You do not need to reinvent the wheel. Napster was perhaps an analog for iTunes. It showed that people were willing to download music from the web. When they finally got around to it, Google discovered its analog in advertising.
2. Antilogs: Perhaps you have a highly unfavorable reaction to what you see a company is doing. Never fear, this too is a gift. Terrible ideas are everywhere; compose a list and make sure to take a different path. The antilog for iTunes was the behavior of record companies that forced customers to buy an entire album, even if they only wanted one or two tracks. Are Spotify and Pandora the impending antilogs to iTunes and Sirius XM to all radio commercials?
3. Leaps Of Faith: There are times (actually many) when data is just not available and you have to make a leap of faith. The Leap of Faith for iTunes was that record companies would allow their music to be sold at a flat rate of $0.99 per track. Spotify had to believe that people would be willing to pay for a vast library of music on a monthly basis.
4. Dashboard: This is a way of compiling all your LOFs (Leaps of Faith) on a sheet of paper and assiduously testing them in the marketplace. Some of the LOFs will work and others will not, but all need to be verified by real customers in the marketplace.
In my last class, the teams took the notion of pivoting to heart. Of the seven projects, three were totally discarded (which is quite a pivot), while one was modified significantly. The end result was better business propositions than I had ever seen before.
This is a good framework to use as you develop your business model and as you pivot from one letter of the alphabet to the next. Keep going until you find just the right one.
Verinder Syal, Author: Discover The Entrepreneur Within